The FSA yesterday made a proposal to make it harder to get a mortgage.
While it’s clear that some people have been allowed to borrow crazy amounts, I’m not sure that their new rules would help.
First of all, for those of us who already have mortgages, what’s the consequence if we can’t remortgage? We’ll be left on the Standard Variable Rate, which at times can be much dearer than the deals on offer. So rather than protect consumers, the FSA’s rules could actually make some people lose their homes.
I agree with Vince Cable (quoted in the article I linked to above) when he says that a “distinction has to be made between existing mortgage holders struggling to renew who clearly need help and those chasing new mortgages.”
However, even if the rules were only imposed on those people taking out new mortgage, I’m not sure the consequences would be desirable.
The one thing this country needs more than anything else is a lot of new export-oriented companies.
However, if the consequence of leaving paid employment to set up a limited company is that one cannot get a mortgage for many years, this will deter people.
Also, the FSA will soon discover that private-sector jobs aren’t really secure any more, so will they also start restricting mortgages for this group?
At the end of the day, the only group of people with fairly secure earnings over several years is public-sector workers.
But if the only way to get a decent pension and a house is to work in the public sector, why should anybody work in the private sector, given that salaries are also lower there?
I hope the next government will reverse this structure, so that the best mortgage deals become available to people running companies, and so that private-sector workers find it at least as easy as public-sector ones to buy the house they want.